-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H00rf5Mj9EiRXkisxvWggR/FGN1BuSYomU/ZuIsOt0GDPI7CMgV6aKyAMVV66Sm1 N8sokkIKbintsOJB8nRSxQ== 0000930661-97-001539.txt : 19970617 0000930661-97-001539.hdr.sgml : 19970617 ACCESSION NUMBER: 0000930661-97-001539 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970616 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: POLYPHASE CORP CENTRAL INDEX KEY: 0000748212 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-CONSTRUCTION & MINING (NO PETRO) MACHINERY & EQUIP [5082] IRS NUMBER: 232708876 STATE OF INCORPORATION: NV FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09083 FILM NUMBER: 97624388 BUSINESS ADDRESS: STREET 1: 16885 DALLAS PARKWAY CITY: DALLAS STATE: TX ZIP: 75248 BUSINESS PHONE: 2147320010 MAIL ADDRESS: STREET 1: 16885 DALLAS PKWY CITY: DALLAS STATE: TX ZIP: 75248 FORMER COMPANY: FORMER CONFORMED NAME: KAPPA NETWORKS INC DATE OF NAME CHANGE: 19910721 10-Q 1 FORM 10-Q U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ Commission file number: 1-9083 POLYPHASE CORPORATION (Exact name of registrant as specified in its charter) NEVADA 23-2708876 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 16885 DALLAS PARKWAY, SUITE 400 DALLAS, TEXAS 75248 (Address of principal executive offices) (214) 732-0010 (Registrants's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 12 months ( or for such shorter period the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No X ------------ ----------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $.01 par value 13,644,109 --------------------------- Outstanding at June 5, 1997 POLYPHASE CORPORATION FORM 10-Q QUARTER ENDED MARCH 31, 1997 - -------------------------------------------------------------------------------- TABLE OF CONTENTS ----------------- PART I. FINANCIAL INFORMATION Page No. - ----------------------------- -------- Item 1. Financial Statements Consolidated Condensed Balance Sheets as of March 31, 1997 and September 30, 1996 2 Consolidated Condensed Statements of Operations for the Three Months Ended March 31, 1997 and 1996 4 Consolidated Condensed Statements of Operations for the Six Months Ended March 31, 1997 and 1996 5 Consolidated Condensed Statements of Cash Flows for the Six Months Ended March 31, 1997 and 1996 6 Notes to Consolidated Condensed Financial Statements 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 PART II - OTHER INFORMATION - --------------------------- Item 1. Legal Proceedings 13 Item 4. Submission of Matters to a Vote of Security Holders 13 Item 6. Exhibits and Reports on Form 8-K 13 Signature Page 14 -1- POLYPHASE CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) ASSETS
March 31, September 30, ----------- ------------ 1997 1996 ----------- ----------- Current assets: Cash $ 1,563,874 $ 280,969 Receivables, net of allowance for doubtful accounts of $510,808 and $519,104 Trade accounts 10,287,324 12,098,852 Current portion of sales contracts 6,467,619 6,625,727 Notes receivable 821,739 972,422 Receivables from related parties 427,081 367,634 Inventories 26,721,117 28,027,779 Prepaid expenses and other 2,494,958 2,676,336 ----------- ----------- Total current assets 48,783,712 51,049,719 ----------- ----------- Property and equipment: Land 765,000 765,000 Buildings and improvements 4,701,041 4,279,917 Machinery, equipment and other 8,595,559 8,575,687 ----------- ----------- 14,061,600 13,620,604 Less-Accumulated depreciation 5,047,639 4,212,872 ----------- ----------- 9,013,961 9,407,732 ----------- ----------- Other assets: Noncurrent receivables Sales contracts 1,324,692 1,333,150 Notes receivable 951,433 1,037,890 Related parties, net allowance of $3,340,000 14,698,032 9,931,054 Excess of cost over fair value of net assets of businesses acquired, net of accumulated amortization of $1,940,199 and $1,557,165 14,634,929 15,041,574 Other intangible assets 2,081,727 1,402,239 Restricted cash 796,121 882,383 Other 4,144,309 4,092,780 ----------- ----------- 38,631,243 33,721,070 ----------- ----------- $96,428,916 $94,178,521 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. -2- POLYPHASE CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (CONTINUED) (UNAUDITED) LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, September 30, ----------- ------------ 1997 1996 ----------- ----------- Current liabilities: Notes payable $10,805,495 $ 9,516,219 Accounts payable 7,324,254 8,581,071 Accrued expenses and other 2,928,802 4,415,011 Current maturities of long-term debt 33,285,652 31,573,716 ----------- ----------- Total current liabilities 54,344,203 54,086,017 Note payable and accrued interest to related party 13,163,916 12,546,600 Reserve for credit guarantees 796,121 882,383 Deferred income taxes 1,475,897 1,475,897 ----------- ----------- Total liabilities 69,780,137 68,990,897 ----------- ----------- Warrants to purchase common stock in subsidiary 1,408,744 1,189,224 Stockholders' equity: Preferred stock, $.01 par value, authorized 50,000,000 shares, issued and outstanding 125,000 and 250,000 shares, respectively 1,250 2,500 Common stock, $.01 par value, authorized 100,000,000 shares, issued and outstanding 13,664,109 and 13,196,966 shares, respectively 136,641 131,970 Paid-in capital 27,839,392 26,630,714 Accumulated deficit (1,761,933) (1,487,695) Notes receivable (975,315) (1,279,089) ----------- ----------- Total stockholders' equity 25,240,035 23,998,400 ----------- ----------- $96,428,916 $94,178,521 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. -3- POLYPHASE CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
For the Three Months Ended March 31, -------------------------- 1997 1996 ----------- ----------- Net revenues $38,409,223 $37,749,771 Cost of sales 32,623,184 29,044,520 ----------- ----------- Gross profit 5,786,039 8,705,251 Selling, general and administrative expenses 3,811,186 5,759,733 ----------- ----------- Operating income 1,974,853 2,945,518 ----------- ----------- Other income (expenses): Interest expense (1,839,932) (1,570,285) Interest income and other (115,857) 385,844 ----------- ----------- Total other income (expenses) (1,955,789) (1,184,441) ----------- ----------- Income before income taxes and warrant accretion 19,064 1,761,077 Income taxes 41,418 643,165 ----------- ----------- (22,354) 1,117,912 Accretion of common stock purchase warrants of subsidiary 109,647 99,911 ----------- ----------- Net income (loss) (132,001) 1,018,001 Dividends on preferred stock (37,500) (37,500) ----------- ----------- Net income (loss) attributable to common stockholders $ (169,501) $ 980,501 =========== =========== Weighted average common and common equivalent shares 13,664,109 13,974,294 =========== =========== Net income (loss) per common share $ (.01) $ .07 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. -4- POLYPHASE CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
For the Six Months Ended March 31, -------------------------- 1997 1996 ----------- ----------- Net revenues $74,575,012 $75,247,061 Cost of sales 62,680,099 58,963,580 ----------- ----------- Gross profit 11,894,913 16,283,481 Selling, general and administrative expenses 8,434,856 10,382,323 ----------- ----------- Operating income 3,460,057 5,901,158 ----------- ----------- Other income (expenses): Interest expense (3,414,350) (3,144,021) Interest income and other 95,103 485,540 ----------- ----------- Total other income (expenses) (3,319,247) (2,658,481) ----------- ----------- Income before income taxes and warrant accretion 140,810 3,242,677 Income taxes 120,528 1,169,805 ----------- ----------- 20,282 2,072,872 Accretion of common stock purchase warrants of subsidiary 219,520 257,575 ----------- ----------- Net income (loss) (199,238) 1,815,297 Dividends on preferred stock (75,000) (75,000) ----------- ----------- Net income (loss) attributable to common stockholders $ (274,238) $ 1,740,297 =========== =========== Weighted average common and common equivalent shares 13,600,432 13,779,389 =========== =========== Net income (loss) per common share $ (.02) $ .13 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. -5- POLYPHASE CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Six Months Ended March 31, -------------------------- 1997 1996 ----------- ----------- Cash flow provided by (used in) operating activities: Net income (loss) $ (199,238) $ 1,815,297 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 1,534,924 1,514,505 Provision for doubtful accounts (8,296) (5,770) Accretion of warrants to purchase common stock of subsidiary 219,520 257,575 (Increase) decrease in, net of effects of acquisitions: Accounts and sales contracts receivable 1,986,390 2,535,939 Inventories 1,306,662 (4,847,849) Prepaid expenses and other 129,849 661,209 Increase (decrease) in, net of effects of acquisitions: Accounts payable (1,256,817) 125,309 Accrued expenses and other (1,486,209) 887,822 ----------- ----------- Net cash provided by (used in) operating activities 2,226,785 2,944,037 ----------- ----------- Cash flows provided by (used in) investing activities: Notes and other receivables 237,140 (168,149) Receivables from related parties (4,826,425) (4,766,022) Capital expenditures (440,996) (372,048) Other intangibles (973,000) - ----------- ----------- Net cash used in investing activities (6,003,281) (5,306,219) ----------- -----------
The accompanying notes are an integral part of these consolidated financial statements. -6- POLYPHASE CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (CONTINUED) (UNAUDITED)
For the Six Months Ended March 31, -------------------------- 1997 1996 ----------- ----------- Cash flows provided by (used in) financing activities: Borrowings (principal payments) under line of credit arrangements, notes payable and long-term debt, net $3,618,528 $(2,917,542) Proceeds from the issuance of 12% subordinated debentures - 1,500,000 Advances from (payments to) related parties - (1,153,000) Principal collections on Pyrenees note receivable 303,774 379,231 Exercise of common stock options 1,229,599 12,500 Dividends on preferred stock (75,000) (75,000) Common stock issuance costs (17,500) (17,642) Proceeds from private placement of preferred stock - 2,500,000 ---------- ----------- Net cash provided by financing activities 5,059,401 228,547 ---------- ----------- Net increase (decrease) in cash 1,282,905 (2,133,635) Cash - beginning of period 280,969 3,275,068 ---------- ----------- Cash - end of period $1,563,874 $ 1,141,433 ========== =========== Supplemental schedule of cash flow information: Cash paid during the period for : Interest $2,643,554 $ 2,220,593 Income taxes $1,311,055 $ 189,536
Supplemental schedule of noncash investing and financing activities: In October 1996, an unrelated third party exercised an option to purchase 357,143 shares of common stock. As consideration, the Company received 125,000 shares of Series A-3 Preferred Stock having a redemption value of $1,250,000. The accompanying notes are an integral part of these consolidated financial statements. -7- POLYPHASE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS MARCH 31, 1997 1. NATURE OF BUSINESS The Company is a diversified holding company that, through its subsidiaries, operates in three industry segments: the forestry segment, which distributes, leases and provides financing for commercial and industrial timber and logging equipment; the transformer segment, which manufactures and markets electronic transformers, inductors and filters; and the food processing segment, which produces high quality entrees, plated meals, soups, sauces and poultry, meat and fish specialties. 2. BASIS OF PRESENTATION The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All material intercompany accounts and transactions are eliminated. The financial statements included herein have been prepared by the Company, without an audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The Company believes that the disclosures are adequate to make the information presented not misleading. The information presented reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results for the interim periods when read in conjunction with the financial statements and the notes thereto included in the Company's latest financial statements filed as part of Form 10-K. 3. LIQUIDITY The Company has not complied with certain covenants involving most of its loan agreements, including covenants that restrict transactions with affiliates and which require the filing of audited financial statements for the Company and its subsidiaries on a timely basis. (See Note 5) As a result, the Company's debt has been classified as current as of March 31, 1997. The Company is in the process of negotiating a transaction involving Overhill that the Company expects will resolve the Rice lawsuit and improve the Company's overall debt structure, but there can be no assurances that such transaction will be consummated. Upon completion of the transaction, the Company believes it will be able to negotiate with the remaining debt holders and obtain waivers to the covenant violations that exist. As such, the Company expects that it will be able to meet its liquidity requirements. -8- 4. RELATED PARTY TRANSACTIONS During January 1996, the Company reached an agreement in principle to manage a project to develop and build a multi-purpose sports facility in Las Vegas, Nevada. The project is being developed by PLY Stadium Partners, Inc. ("Stadium Partners"), a private investment firm headed by Mr. Paul A. Tanner, Chairman and Chief Executive Officer of the Company. As part of the transaction, the Company is also to participate in the facility's management, sales of suites and seat options, concessions and events and is to be compensated for such services. The Company has provided $4 million of debt, bearing interest at 12%, to Stadium Partners. The debt is (1) convertible into a 14% economic interest in the project and (2) is guaranteed by Mr. Tanner and Pyrenees, a private investment firm headed by Mr. Tanner. On November 15, 1996, Stadium Partners, through a newly-formed partnership, purchased 62 acres in Las Vegas for the development of the stadium and adjacent convention facility. Financing was provided by Lehman Brothers Holdings, Inc. ("Lehman") through a partnership, Nevada Stadium Partners Limited Partnership ("Nevada Partnership") with Lehman as the lender receiving an equity interest in the project. The Company has guaranteed the repayment of the loan from Lehman to the partnership in the above mentioned transaction, upon the occurrence of certain events. Such guarantee is effective upon the occurrence of certain conditions, including without limitation if the Partnership files for bankruptcy or insolvency, if representation by the Partnership proves to be fraudulent regarding the financial condition of the Borrower, the land securing the loan is further encumbered or ownership transferred without the consent of Lehman. In January 1997, the Company further advanced Stadium Partners $4.9 million. The funds advanced consisted of $2.5 million, drawn from an existing line of credit, and $2.4 million from a six month term note. The term note bears interest at 16%, is payable monthly and is secured by a second lien on the Company's headquarters. As additional collateral, the Company agreed to issue an option on 500,000 shares of Series A-2 preferred stock (convertible into 1,000,000 shares of common stock) which is exercisable upon default of certain covenants of the agreement. In connection with the aforementioned transaction, the Company entered into a two year consulting agreement with a principal of the lender. In consideration of the agreement, the Company issued an option to purchase 200,000 shares of common stock at $.01 per share. During the twelve months ended September 30, 1996, the Company accrued management and service revenues of $2,550,000 and interest income of $790,000 related to the Company's activities with Stadium Partners, the collectibility of which is dependent upon the success of the project and/or the guarantees referred to above. As a result of the financing described above Stadium Partners is precluded from making any distributions until permanent project financing is secured. As a consequence of Stadium Partners inability to make its payment to the Company due March 15,1997, the Company established a reserve of $3.34 million as of September 30, 1996, which represents the income accrued. The reserve will be reduced as collections and distributions are made pursuant to the Stadium Partners loan agreements. The Company no longer accrues management fees or interest income on the existing advances. -9- As of March 31, 1997, the Company had net additional advances to Stadium Partners of $4,826,425, which is subject to the above guarantees, and are currently due and payable. During the six months ended March 31, 1997, the Company made advances to Mr. Tanner totalling $70,300 resulting in a balance due of $85,160 as of that date. In connection with the TTI acquisition, the Company also issued a non- interest bearing note to Harold Estes for $10,000,000 due October 31, 1994, on which the Company imputed interest at 8.0% per annum. The Company has since modified, extended and renewed the note whereby the note currently having a balance including accrued interest of $13,163,916 has been extended to December 1, 1997 bearing interest at 10% through June 30, 1997 and 16% thereafter. The Company anticipates that it will be required to refinance this note payable on a long-term basis and is presently in negotiations with potential lenders to accomplish their goal. There is no certainty that Company will be able to refinance this note on acceptable terms or at all, by December 1, 1997. The note holder has no recourse to any of the assets or capital stock of Polyphase Corporation or any of its other subsidiaries and no cross-default provisions exist between this note and any other Polyphase debt. 5. CONTINGENCIES In January 1997, a suit was filed in District Court of Dallas County against the Company by Rice Partners II, L.P., subordinated debt holders of the Overhill Farms subsidiary. The suit claims, among other things, that the Company breached covenants of the subordinated debt agreement and refused to cure the defaults within a reasonable period of time. The Company has filed a counter suit claiming Rice Partners II, L.P. (i) refused to comply with verbal agreements to the indenture (ii) conspired with the former general partner of Overhill to force the Company to sell Overhill Farms at a distressed price in order to benefit Rice Partners II, L.P. and (iii) caused the halting of trading of the Company's stock. 6. STOCKHOLDERS' EQUITY In October 1996 a director of the Company exercised options on 75,000 of common stock at $.75 per share. In October 1996 an associate of the holders of the Company's Series A-3 Preferred Stock tendered 125,000 shares of preferred stock as consideration for the exercise of options on 357,143 shares of common stock at $3.50 per share. In November 1996 a former executive of the Company exercised options on 35,000 of common stock at $.01 per share. Such options were granted in consideration for a consulting contract and were valued at $200,000. -10- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS Statements contained in this Form 10-Q that are not historical facts, including, but not limited to, the projections contained herein, are forward- looking statements and involve a number of risks and uncertainties. The actual results of the future events described in such forward-looking statements in this Form 10-Q could differ materially from those stated in such forward-looking statements. Among the factors that could cause actual results to differ materially are: adverse economic conditions, industry competition and other competitive factors, government regulation and possible future litigation. RESULTS OF OPERATIONS Revenues for the six months ended March 31, 1997 decreased $672,000 (1%) to $74,575,000 from $75,247,000 during the six months ended March 31, 1996. The decrease in revenue is primarily attributable to the exclusion of the Computer Group in fiscal 1997 offset by higher revenues in the Timber Group. Operating income also decreased $2,441,000 (41%) from the comparable period due to significantly lower gross margins at the Food and Timber Groups. Net income for the six months ended March 31, 1997 decreased $2,014,000 (111%) to a loss of $199,000 from net income of $1,815,000 during the six months ended March 31, 1996. Net income was adversely affected by lower gross margins and higher operating and interest expense. The Food Group's revenues increased slightly to $48,732,000 for the six months ended March 31, 1997 as compared to $47,738,000 for the six months ended March 31, 1996. Operating income decreased $861,000 (25%) to $2,561,000, from $3,428,000 in the comparable period. Revenues have remained flat primarily due to slower than anticipated growth in the new business segments of food service products and Overhill branded items due to the competitive environment. The slower growth in new segments coupled with mature market of the weight loss and airline segments have forced gross margins to decrease approximately 2% from the past year. Revenues for the Timber Group for the six months ended March 31, 1997 increased $6,601,000 (38%) to $24,080,000 from $17,479,000 for the six months ended March 31, 1996. Operating income for the comparable period decreased $497,000 (26%) to $1,412,000 for the six months ended March 31, 1997 from $1,909,000 for the six months ended March 31, 1996. Increased revenues were primarily due to increased demand for new equipment in East Texas as the lumber prices stabilized in fiscal 1997 and large operators made capital expenditures. Profit margins decreased significantly in fiscal 1997 due to a higher percentage of sales in new units which carries lower profit margins. In the comparable period of 1996 a slowdown in the timber market resulted in decreased sales of new units and increased sales of higher margined used units or refurbishment of existing units. Management expects sales to continue to grow with the lower profit margins in fiscal 1997. Revenues in the Transformer Group for the six months ended March 31, 1997 decreased $77,000 to $1,763,000 from $1,840,000 for the comparable period in fiscal 1996. Operating income also decreased to $43,000 for the six months ended March 31, 1997 from $71,000 for the comparable period in fiscal 1997. The decreases are primarily attributable to the competitive market and the lower profit margins on government contracts. LIQUIDITY AND CAPITAL RESOURCES During the six months ended March 31, 1997, the Company's operating activities provided cash of approximately $2,227,000 compared to $2,944,000 of cash provided in the comparable period of fiscal 1996. The decrease from the comparable period of cash provided by operating activities were primarily due from the net loss, and large decreases in accounts payable and accruals. These were offset by decreases in accounts receivable and inventories in the Food Group subsidiary. -11- During the six months ended March 31, 1997, the Company's investing activities used cash of approximately $6,003,000 compared to a use of cash in the amount of $5,306,000 during the comparable period in fiscal 1996. The Company's use of cash consisted primarily of advances to PLY Stadium Partners a company affiliated with Mr. Paul A. Tanner, the Company's Chairman of the Board, President and Chief Executive Officer. During the six months ended March 31, 1997, the Company's financing activities provided cash of approximately $5,059,000 as compared to $229,000 of cash provided in the comparable period in fiscal 1996. During the period the Company borrowed approximately $4.9 million consisting of $2.4 million from an existing line of credit and $2.5 million from a six month term note. The term note bears interest at 16%, is payable monthly and is secured by a second lien on the Company's headquarters. As additional collateral, the Company agreed to issue an option on 500,000 shares of Series A-2 preferred stock (convertible into 1,000,000 shares of common stock) which is exercisable upon default of certain covenants of the agreement. The funds from these transactions were used in advances to PLY Stadium Partners, Inc. The Company has not complied with certain covenants involving substantially all of the Company's loan agreements, including covenants that restrict transactions with affiliates and which require the filing of audited financial statements for the Company and its subsidiaries on a timely basis. As a result, the Company's debt has been classified as current as of September 30, 1996 and March 31, 1997. The Company is in the process of negotiating a transaction involving Overhill that the Company expects will resolve the Rice lawsuit and improve the Company's overall debt structure, but there can be no assurance that such transaction will be consummated. Accordingly, the Company's management believes that cash generated from the proposed Overhill transaction and from operations, together with existing lines of credit, will be sufficient to enable the Company to meet its liquidity requirements for the next 12 months. -12- PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In January 1997, a suit was filed in District Court of Dallas County against the Company by Rice Partners II, L.P., subordinated debt holders of Overhill. The suit claims, among other things, that the Company breached covenants of the subordinated debt agreement and refused to cure the defaults within a reasonable period of time. The Company has filed a counter suit claiming Rice Partners II, L.P. (i) refused to comply with verbal agreements to the indenture (ii) conspired with the former general manager of Overhill to force the Company to sell Overhill Farms at a distressed price in order to benefit Rice Partners, II, L.P. and (iii) caused the halting of trading of the Company's stock. ITEM 3. DEFAULTS UPON SENIOR SECURITIES See "Management's Discussion and Analysis--Liquidity and Captial Resources" for a description of certain defaults. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits 27 Financial Data Schedule (b) Reports on Form 8-K - The following reports were filed on Form 8-K during the quarter ended March 31, 1997. NONE -13- SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. POLYPHASE CORPORATION (REGISTRANT) Date: June 9, 1997 By: /s/ Paul A. Tanner --------------------------------- Paul A. Tanner President and Chief Executive Officer -14- INDEX TO EXHIBITS Exhibit No. Exhibit ----------------- ----------------------- 27 Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 1 6-MOS SEP-30-1996 MAR-31-1996 0 0 18,003,763 3,850,808 26,721,117 48,783,712 14,061,600 5,047,639 96,428,916 54,344,203 0 0 1,250 136,641 25,102,144 96,428,916 74,575,012 74,575,012 62,680,099 62,680,099 8,434,856 0 3,414,350 140,810 120,528 (274,238) 0 0 0 (274,238) (.02) (.02)
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